NEW DELHI: The country's largest insurer, Life Insurance Corporation (LIC), may pick up 5 per cent stake in state-run power equipment maker BHEL in a block deal. The proposal initiated by the heavy industries & public enterprises ministry is now being processed by the disinvestment and financial services department of the finance ministry.

The ministry has been opposed to stock market sale of BHEL's share by the government under its disinvestment programme that has been drastically pruned to Rs19,027 crore from Rs54,000 crore budgeted initially."The proposal has come from the heavy industries ministry. All concerned departments are examining it," said a government official, adding that the proposal will be placed before an empowered group of ministers by early next month.A senior official with LIC told ET that they have been unofficially made aware of the developments. "Well, if the government asks us there is little choice we have," the official said, adding that such a proposal, however, will have to be approved by the insurer's board. "That is the way it has to be," he said.The company's scrip, which had touched a 52-week low of Rs100.35 in August 2013, has since recovered smartly. It closed at Rs159.5 on the NSE on Tuesday. A 5 per cent stake sale in the company may fetch the government around Rs2,000 crore. The government is expected to approach only LIC, as the stake to be divested is 5 per cent and even if LIC picks up the whole stake, it will not breach the insurer's investment limit."There is no other financial institution except LIC which will be investing in the company," said another government official, aware of the deliberations. In August 2011, the Cabinet had cleared selling government's stake in BHEL through a followon public offer (FPO), but the stake sale has not progressed because of opposition from admin-istrative ministries. The government holds a 67.72 per cent stake in the firm."Market conditions are not suitable for the moment for such a valuable company to be sold in the openmarket," heavy industries & public enterprises minister Praful Patel had said earlier this month ruling out stock market sale of company's shares.The finance ministry is counting on stake sale in the company to reach its revised target. "We expect to reach this target through IOC, BHEL and the proposed ETF," said a finance ministry official, adding that, so far, the government has garnered around Rs5,600 crore through divestment procceds. ONGC and Oil India will buy 10 per cent government stake in IOC which is expected to fetch around Rs5,000 crore.